1.

Rocker Corp. is expanding rapidly, with its dividend growth rate for the coming year projected at 15.00%. This rate will decline by 3.00 percentage points per year until it reaches the industry average of 3.00%. Once it reaches 3.00%, it will stay there indefinitely. The most recent dividend was $5.00 per share. To clarify, Rocker makes a payment once per year and the expected dividend per share for the next five years is:

D₁=$5.00(1.15)=$5.75

D₂=$5.75(1.12)=$6.44

D₃=$6.44(1.09)=$7.02

D₄=$7.02(1.06)=$7.44

The market requires a return of 10.00% per year on investments such as this one. Based on this information, compute the current value of each share.

what's the formula used?

2.Mr. Homers friend Marge has asked for help with her retirement planning. Marge, who turned 27 years old today, has $5,000 already set aside in her retirement account and plans to add an equal amount in real terms at the end of each of the next 38 years so that she can retire at age 65. Her goal is to build a retirement account that will enable her to make 29 annual withdraws with a purchasing power of $50,000 (at todays prices) on her 66th through 94th birthdays. Her retirement account is expected to earn 6.00% per year and the expected inflation rate is 2.50% per year. How much does Marge need to set aside in real terms at the end of each of the next 38 years to meet her retirement goal? what's the formula used?